BTS agency joins battle for South Korea’s SM with tender offer

SEOUL: HYBE, manager of South Korean boy band BTS, announced a deal on Friday to buy a 14.8% stake in rival SM Entertainment from its founder, escalating a corporate battle between the godfather of K-pop and estranged management.

HYBE also announced a tender offer for SM shares held by minority shareholders, seeking to buy up to 25% of the rival agency, sending shares of SM as much as 16% up to record highs.

The news comes just days after SM Entertainment announced a 217 billion won ($172 million) share sale to Kakao Corp on Tuesday, giving the country's top mobile messenger operator a 9.05% stake and SM an ally to counter founder and top shareholder Lee Soo-man.

Lee controls 18.4% of the company coined with his initials and has been in dispute with its current management in recent years over issues involving the company's business dealings with his private company.

The former SM Chief Producer hasn't held any official role at SM for more than a decade but has also reportedly exerted a significant influence in managing and training SM's K-pop acts.

HYBE's acquisition plan drew sharp criticism from SM Entertainment.

"We oppose all aggressive outside mergers and acquisitions including HYBE," SM said in a statement.

HYBE said it was seeking management rights to strengthen its position in the K-pop industry.

"(We) fully agree with Lee’s strategic initiatives including metaverse, a multi-label system, and the sustainable vision campaign," HYBE Chairman Bang Si-Hyuk said in a statement.

HYBE is buying the 14.8% stake from Lee for 423 billion won and offered 120,000 won per share in a tender offer, a 22% premium to the closing price of SM Entertainment on Thursday. SM shares were trading up 16% at 114,200 won.

HYBE is the agency that manages K-pop mega band BTS. SM is home to other popular K-pop acts including NCT and Aespa.

The South Korean pop music industry was dominated for years by three major companies - SM, JYP and YG Entertainment - until the K-pop boy band BTS rose to international fame, making HYBE bigger than the other three.

But all seven BTS members are expected to begin their military service over the next couple of years, starting with Jin, the group's oldest member who joined the military in December.

The septet is set to return in full only in 2025. (Reuters)